Superstrike Ltd vs Marino Rodrigues and Tenancy Deposits

LettingFocus.com brings you news of a rather idiotic court case and a judge’s decision that has wide implications for tenancy deposits.

You may have read about a recent legal judgment in a case relating to tenancy deposit schemes which is now causing chaos and confusion for all landlords who have taken a deposit and also for those who have not taken a deposit because they did not think they needed to.

The case is that of Superstrike Ltd vs Marino Rodrigues.

The tenancy, which was an assured shorthold tenancy, began in January 2007, before the 6 April 2007 introduction of tenancy deposit protection in England and Wales. The tenancy persisted, on a statutory period basis, without renewal or changes from January 2008. No deposit was ever protected in relation to this tenancy, as it was received prior to this becoming a requirement and a Section 21 notice was served in June 2011 to end the periodic tenancy.

 

The rather silly and confusing judgement was as follows:

 

1. That a statutory periodic tenancy is a new and distinct tenancy, not a continuation of the tenant’s previous status.

 

2. The legal position was that the deposit held by the landlord at the end of the fixed term was deemed to have been received in relation to the periodic tenancy in January 200. As it was received in January 2008, after the introduction of TDP, it should have been protected. As the landlord did not comply with Section 213 of the Housing Act 2004, they did not have the right to serve a Section 21. This rules the Section 21 invalid.

According to the National Landlords Association (NLA):

1. The ruling does not apply to any deposits taken after 6 April 2007. In other words it does not introduce a requirement to re-protect deposits held lawfully in accordance with a TDP scheme’s rules when a tenancy becomes periodic.

 

2. The ruling does not look into financial sanctions; this case only focused on whether the landlord’s Section 21 notice was valid.

 

3. The ruling does not look into the need to provide prescribed information.

Implications

Well, if you have any assured shorthold tenancies which began pre-6 April 2007 and became periodic after 6 April 2007, for which you hold a deposit which was not protected, you may not be able to issue a Section 21 notice.

If you do not have any tenancies which match this description, this judgement should have no impact on you whatsoever. Depending on the TDP scheme used, you may receive correspondence in the near future asking you to confirm the status of tenancies for which the fixed term has ended but a request to unprotect the deposit has not been received.

Likewise, in the future you may be asked to let the scheme provider know when tenancies become periodic.

If I have pre-2007 tenancies like this, what should I do?

There is no simple answer to that question. Due to the nature of appeals, only the exact circumstances of the particular case in question are examined. According to the NLA, the two ways to mitigate the risk of being caught out by this precedent are:

1. Return the deposit. This should remove the risk of a future Section 21 being deemed invalid and is implied by the judgement. However, Justice Lloyd deliberately reserves judgement on this matter. (Judges like to leave some grey areas for lawyers to pick over and, of course, charge fees for.)

1. Protect the deposit. Likewise this should show intention to comply with the law and remove the risk. However, given the recent amendment to Section 215 of the Housing Act 2004, this may not be sufficient to avoid sanctions. Only a further legal case could determine this. (More work for the legals!)

Wait and See

According to the NLA, there is a third option available to landlords affected, which is not intended to mitigate risk and may not be advisable, but could be a valid course none the less, and that is: ‘wait and see’

It is entirely possible that this case will be taken to the Supreme Court, which could overturn the judgement. The NLA has said it is keen to speak to the landlord in this case and is seeking legal advice to determine what options may be available to challenge the decision.

Furthermore, the NLA has said “We are keen to impress upon ministers at DCLG that it has a responsibility to regain control over this legislation and should act swiftly to amend the Housing Act 2004 to remove this uncertainty – in the same way it did in 2011 following the Tiensia case.”

I prefer the wait and see approach for the one tenancy I have that is affected.

I have a great relationship with the tenant in that property and he is leaving soon anyway. But if you have a tenant who is litigious and is a pain in the neck, you may prefer preventative action and protect the deposit.

But what a total shambles – and what an idiotic judgment that goes against all logic and common sense. After all, how can a tenancy that is allowed to “run on” at the end of a fixed tenancy to become a periodic tenancy, be a “new tenancy”?